Nanjing Sample Technology (HKG:1708 shareholders incur further losses as stock declines 25% this week, taking five-year losses to 87%

Some stocks are best avoided. We don't wish catastrophic capital loss on anyone. Spare a thought for those who held Nanjing Sample Technology Company Limited (HKG:1708) for five whole years - as the share price tanked 88%. And it's not just long term holders hurting, because the stock is down 58% in the last year. Furthermore, it's down 65% in about a quarter. That's not much fun for holders. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

See our latest analysis for Nanjing Sample Technology

Nanjing Sample Technology isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last five years Nanjing Sample Technology saw its revenue shrink by 25% per year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 13% per year in that period. We don't think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Nanjing Sample Technology's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 5.1% in the last year, Nanjing Sample Technology shareholders lost 58%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 13% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for Nanjing Sample Technology you should be aware of, and 1 of them makes us a bit uncomfortable.

But note: Nanjing Sample Technology may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.